How much business finance jargon do business owners know?

Paul Crayston October 1, 2015Comments Off on How much business finance jargon do business owners know?

A little over a month ago we set a simple, 10 question quiz to test your knowledge of business finance.

The results are now in…

A worrying attitude to venture capital

So we’ll start with the bad news. Nearly one in five (17%) respondents thought that the injection of cash into a business with no expectation of a return could be defined as ‘venture capital’. We’re guessing a fair few venture capitalists might raise a knowing eyebrow at this one! If you do raise money from a venture capital fund, you’ll probably find they’re quite keen to make a return on their investment. Of course one of the great things about venture capital funding is that you get more than just money, you also get the benefit of their expertise in growing businesses.

Fortunately 71% of respondents correctly identified that we were talking about ‘grants’.

Everyone wants their business to be a… sphinx?

A privately owned start-up valued at $1bn is often called a unicorn, on account of how rare they are. Only slightly less rare was the knowledge of this terminology. One in seven respondents thought these businesses were commonly known as a ‘phoenix’, 12% went with ‘pegasus’ and nearly one in 10 (9%) thought the likes of Shazam and Transferwise were ‘sphinxes’.

What causes insolvency?

We asked whether the solvency of a business represented its ability to meet long-term obligations or short-term obligations. Nearly one in three respondents got this one wrong, answering ‘long-term’. The reality is that you can have a great long-term business that collapses under the weight of its short-term expenses and debts. Cash is king!

The good news…

Business owners do know their stuff though. The most common answer for every question was the right one. Correct answers were given in 79% of all questions. Definitions of revenue (97%) and overheads (89%) were the most successfully identified. Give yourselves a pat on the back!

Being a successful business man doesn’t require you to know all this stuff from birth, everyone has to learn it somewhere. If you don’t know your unicorns from your sphinxes, or your gross profit from your EBIT, then check out our jargon buster.

Do you know the difference between your accounts payable and accounts receivable? Could you explain what a letter of credit is? This month in our latest ebook we’re focusing on bringing greater transparency to the jargon jungle of business finance.